Abbey Cuts Loan Fee

Fri, 27 Jun 2008

Abbey have announced that they have cut the fee for its flexible mortgage by £1,000 following remarks from the Chancellor that such fees are unjust. Alistair Darling’s comments prompted the announcement by Abbey that they have cut their fee from £2,499 to £1,499, though such a decrease may prompt an increase in interest rates to offset the loss.

Lenders often charge such a fee in order to appear competitive alongside other banks . By charging large one off fees, banks are able to reduce their interest rates in the hope of attracting new customers. On a typical Abbey five year loan of £100,000, the advertised interest rate is 6.43 per cent, but this jumps to 6.7 per cent when the initial fee is factored in.

Chancellor Alistair Darling’s comments that such fees are unfair are partly due to the length of fixed rate deals, which tend to last for just a few years, thus increasing the impact of such a large initial fee.
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